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How foreclosure settlement affects borrowers

Many details of the $8.5 billion mortgage foreclosure settlement that federal banking regulators announced Monday have not been finalized yet. Here are some answers for borrowers.

Q: How much money is in it?

A: Ten banks and mortgage companies will pay $3.3 billion in cash to borrowers and $5.2 billion in mortgage relief to settle federal regulators’ investigations into alleged foreclosure abuses. This settlement largely replaces a 2011 settlement between the same regulators and leading home loan servicers.

A: That hasn’t changed. You’re eligible if your primary home was in some stage of foreclosure in 2009 or 2010 and your loan was handled by one of the participating servicers.

Q: If I think I’m eligible, what should I do now?

A: Nothing. If you’re eligible, regulators say you’ll be contacted by the end of March by a company that will function like a claims administrator.

Q: Must I prove that I was harmed?

A: Probably not. Your servicer will place your case in one of 11 categories representing different kinds of harm. Regulators will spot check those placements.

Q: What’s the purpose of that?

A: The categories will be used to decide how much you get. Servicers are supposed to place you in the category that would net you the highest payment, based on your case.

Everybody in the same category will get the same compensation. For bigger payouts, expected to be up to $125,000, “some verification” may be required, says OCC spokesman Bryan Hubbard. Few are likely to get that much.

Q: I asked for a review of my case under the 2011 settlement. What happens now?

A: About 495,000 people did that. If you did, you’ll likely get an extra, undetermined payment, regulators say.

Q: What if I didn’t suffer a foreclosure abuse?

A: You’ll still be paid. But it will may be a small amount.

Many details of the $8.5 billion mortgage foreclosure settlement that federal banking regulators announced Monday have not been finalized yet. Here are some answers for borrowers.

Q: What if I think I should get more than what I do?

A: No appeals allowed. You could still sue the servicer.

Q: How do I get a piece of the $5.2 billion in mortgage relief?

A: Servicers will decide that. The kind of help they provide will earn them different levels of credit toward meeting their obligations under the settlement. For instance, if they reduce your home loan balance, they’ll get $1 in credit for every dollar in debt forgiven, regulators say.

Other types of relief will not be dollar for dollar. Those formulas are still being worked out.

Q: How is this settlement different from the $25 billion national mortgage settlement reached last year?

A: Under that settlement, just five servicers are participating. They are Bank of America, Chase, Citibank, Ally/GMAC and Wells Fargo. They’re paying out $1.5 billion to borrowers who actually lost a home to foreclosure from 2008 through 2011 and meet other requirements. They’re also extending more money in mortgage relief. The settlements are more similar now in that actual errors won’t have to be discovered for borrowers to be compensated.

Q: Can servicers get credit for both programs by helping the same homeowner?

A: No, the OCC says.

Q: What if my servicer was part of the first settlement but not the new one?

A: Talks are continuing with them, the OCC says. If they never sign on, their old foreclosure reviews will continue. Those servicers are HSBC, Ally (formerly GMAC), EverBank and IndyMac, part of OneWest Bank.